NEW YORK (TheStreet) –– As Apple (AAPL) - Get Report gets set for perhaps its largest holiday quarter ever, investors may still be underestimating how much gas is left in the company's tank.

Barclays Capital analyst Ben Reitzes said he believes that though Apple's upside over the next several months is largely due to the iPhone, which has been selling like gangbusters since it was first announced in September, there are more levers the company can pull, including working on the cost structure and boosting gross margins.

"[W]e believe consensus estimates for gross margins could be conservative for a few years given historic mix shifts within iPhone & iPad toward bigger screens, along with the introduction of the new high-margin Apple Watch & innovative services," Reitzes wrote in a note.

Reitzes raised his price target on Apple to $140, but kept his "overweight" rating on the company, which recently hit $700 billion in market capitalization.

Shares of Apple have gained 43.9% year to date, vastly outpacing the 14.9% gain in the Nasdaq.

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Apple announced it sold more than 10 million iPhones in the first weekend they were available, and the company is selling everything it can make, particularly the 5.5-inch iPhone 6 Plus, which starts at $299 and should continue to add to Apple's historically high gross margins. Apple said it would have sold more iPhone 6 Plus units but the phone is "supply constrained," according to comments from Apple Chief Financial Officer Luca Maestri made during Apple's latest earnings call. Some analysts on Wall Street are calling for Apple to sell as many as 70 million iPhones in the quarter, which would be a record for any quarter, much less the all-important holiday quarter.

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Though sell-side analysts do not provide a consensus iPhone unit estimate, analysts surveyed by Thomson Reuters expect the company to earn $2.52 a share on $66.249 billion in revenue in the fiscal first quarter. When Apple reported fiscal fourth-quarter results, it said it expects to generate between $63.5 billion and $66.5 billion in revenue, with gross margins between 37.5% and 38.5%. 

As Apple's gross margins have trended, so have the shares. Reitzes noted that Apple's shares bottomed in the middle to latter part of 2013 when the company's gross margin was 36.9%, due in part to weaker-than-expected iPhone 5 sales. Since that time, Apple's gross margins have trended higher, and Reitzes believes they "are set to continue to move up appreciably over the next few quarters, and our estimates for FY16 and FY17 could even be conservative given fundamental product mix shifts with new products."

One of those new products is the company's mobile payments initiative, Apple Pay. CEO Timothy D. Cook recently said the company already has secured more than 1 million credit cards for Apple Pay, which allows customers to pay with their iPhones at certain retail stores using a Near Field Communications (NFC) chip inside the iPhone, made by NXP Semiconductor (NXPI) - Get Report .

Reitzes believes that Apple Pay is "a real margin expansion story and stronger leadership" and its current use case is not nearly what it could be in the future, as mobile payments expand.

Apple Pay currently is largely used for in-app purchases, said Bill Clerico of WePay, a payments company that is dedicated toward online marketplaces, in an interview. But the potential is so much greater. "If they [Apple] add it to Safari for checkout, that's a real game changer," Clerico said over the phone. "I'm watching that pretty closely and am pretty excited about that."

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Written by Chris Ciaccia in New York

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